By Scott Haggett
CALGARY, Alberta Feb 14 A second Canadian
pipeline project to the United States is now facing delays as
operator Enbridge Inc awaits a U.S. presidential
permit, a development that may strain prices for Alberta oil
sands crude and relations between the two countries.
Enbridge, Canada's largest pipeline company, said it no
longer expects to get the permit amendment it needs to expand
its Alberta Clipper line in time to start pumping extra oil on
it at midyear as it had planned. It applied for the permit in
"Based on where we see things at the moment and over the
last few weeks, we feel the permit amendment will take longer
than midyear issuance that we had expected," Enbridge Chief
Executive Al Monaco said on a conference call. "That being said,
we are undertaking some temporary system optimization efforts
that pretty much mitigate any impact on throughput."
Enbridge's plan to increase capacity on its existing Clipper
line by 120,000 barrels per day (bpd) in the initial stage is a
far smaller project than rival TransCanada Corp's
controversial Keystone XL oil pipeline from the oil sands to the
U.S. Gulf Coast.
But it has recently started to face opposition from
environmental groups that hope that blocking exports will slow
expansion of the oil sands, where they say production is
In Washington, an official at the State Department said the
delay is procedural, not political. The original contractor who
was to conduct the necessary environmental impact study
withdrew, and a search for another contractor is underway, the
Enbridge said it can tweak its massive mainline system,
which delivers the bulk of Canada's oil exports to the United
States, to handle additional shipments until it has the permit
But a lengthy delay could further pressure Canadian crude
prices, which trade at a discount to U.S. grades, as rising
production of crude from the oil sands is running up against
limited pipeline capacity. That discount stood at $25.25 below
the U.S. West Texas Intermediate benchmark price on Friday.
It could also further strain relations between the two
nations, with Canada already lobbying Washington heavily to
reject the appeals of environmental groups and approve Keystone
XL, a move that Canadian Prime Minister Stephen Harper said is
However, opponents of the two projects again called for the
U.S. administration to refuse approvals.
"Secretary of State (John) Kerry and President (Barack)
Obama can determine the fate of future tar sands expansion and
of our climate by holding true to President Obama's own climate
protection test and denying the Keystone XL and Alberta Clipper
pipelines," Jim Murphy, senior counsel at the National Wildlife
Federation, said in a statement.
Enbridge is no longer saying when it expects to get the
go-ahead for the project, which involves adding pumping capacity
to the existing Alberta Clipper line, which now carries 450,000
bpd from Hardisty, Alberta, to Superior, Wisconsin.
TransCanada has waited more than five years for the Obama
administration to decide if it will approve the Keystone XL
project. Analysts, however, don't expect Enbridge's expansion to
attract the same level of attention from opponents that Keystone
XL has received.
"There's nothing that's getting us as concerned as we are
with other projects such as Keystone," said David McColl, an
analyst at Morningstar. "Enbridge's projects have managed to
avoid the same level of activist scrutiny."
Enbridge wants to expand the Alberta Clipper line to be able
to handle 800,000 barrels per day so that it can move rising
volumes of crude from the Alberta oil sands. It had expected the
first phase of the expansion to be complete at midyear, while a
second, 230,000 bpd, phase had been scheduled to be wrapped up
The company said it can handle the additional crude expected
for the initial phase by adding chemicals that reduce drag,
allowing more oil to be shipped on existing lines, and through
other measures until it has the permit in hand.
Enbridge reported a lower-than-expected adjusted profit in
the fourth quarter, mainly due to losses on hedging contracts.
Enbridge posted a net loss of C$267 million ($243 million),
or 32 Canadian cents a share, compared with a profit of C$146
million, or 18 Canadian cents a share, a year earlier.
The loss was mainly driven by a C$337 million loss at its
energy services business due to a fall in the fair value of its
Excluding one-time items, Enbridge earned 44 Canadian cents
per share, below the average estimate of analysts of 46 Canadian
cents, according to Thomson Reuters I/B/E/S.
Enbridge had warned in December that 2013 earnings would be
at the low end of its target as it completed an expansion of its
Revenue, however, jumped more than 18 percent to C$8.29
billion in the quarter as higher volumes were pumped though its
Canadian Mainline and other new pipeline systems.
Analysts were expecting revenue of C$7.94 billion.
Enbridge shares, which have gained 8 percent in the last six
months, were up 43 Canadian cents at C$47.80 on the Toronto